UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level
MARK SCHEME for the June 2005 question paper
2281 ECONOMICS
2281/02
Paper 2 (Extended), maximum mark 80
This mark scheme is published as an aid to teachers and students, to indicate the
requirements of the examination. It shows the basis on which Examiners were initially
instructed to award marks. It does not indicate the details of the discussions that took place
at an Examiners’ meeting before marking began. Any substantial changes to the mark
scheme that arose from these discussions will be recorded in the published Report on the
Examination.
All Examiners are instructed that alternative correct answers and unexpected approaches in
candidates’ scripts must be given marks that fairly reflect the relevant knowledge and skills
demonstrated.
Mark schemes must be read in conjunction with the question papers and the Report on the
Examination.
•
CIE will not enter into discussion or correspondence in connection with these mark
schemes.
CIE is publishing the mark schemes for the June 2005 question papers for most IGCSE and
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
www.xtremepapers.net
June 2005
GCE Ordinary Level
MARK SCHEME
MAXIMUM MARK: 80
SYLLABUS/COMPONENT: 2281/02
ECONOMICS
(Extended)
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Page 1
Mark Scheme
GCE O LEVEL– JUNE 2005
Syllabus
2281
Paper
2
Section A
1 (a)
The Netherlands has 0.5% fall in output between April and June, other
countries have 0.1% and 0.2%. (1). The Netherlands has also been
contracting for the previous 8 months. (1)
[2]
(b)
Identification of the letters and brief explanation of the term.
[3]
(c)
Expect one example of each type of tax (2) and a comment on whether the
tax is levied on a person at source or on earning or on subsequent
expenditure. (2)
[4]
(d)
Identification of two aims. Falling taxes might help change income
distribution, might help income and spending and thus growth, might help
production and thus move towards full employment. (6). 3 marks for each
one of the two aims but only 2 marks if the aim is only implied.
[6]
(e)
To make better use of human resources; it will reduce government
expenditure on benefit payments; it might result in less crime; it might
encourage economic growth; it will increase national income; it may result in
political votes.
[5]
Section B
2 (a)
A quota is a fixed amount of production. A subsidy affects production
through a reduction in costs which might result in lower prices or higher
profits. Diagram not expected, but could be used. (5). If only quota or
subsidy and so no distinction, max of 2 marks.
[5]
(b)
1 for DS curves, 1 for shift of the supply curve downwards, 1 for P and Q
labels, 2 for explanation which need only clearly explain the change in
equilibrium position if any discussion on profits has been given in (a). If
there is no discussion in (a) that discussion could occur here.
[5]
(c)
Explanation either in terms of proportionate responsiveness of demand or in
terms of equation. (simple statement 1, range of values 1, examples 1).
[3]
(d)
Comment on changes in price affecting the amount demanded. Up to 4
marks for a comment on how a change in price could affect revenue.
For a full range of marks it must be recognised that the statement implies
that elasticity has increased/demand has become more responsive. Sales
decrease with the implication that revenue is affected to a greater extent
than in the past. There should be some comparative statement with the
response previously expected as the spokesman said the growers were ‘no
longer in a position…’. This might be due to a change in attitudes towards
smoking.
[7]
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Page 2
Mark Scheme
GCE O LEVEL– JUNE 2005
Syllabus
2281
Paper
2
3 (a)
Comment on changes in either revenue or costs or both. Could give an
example of why revenue or costs might change. (5). Max of 3 on either
revenue or costs if no understanding of profits is shown.
[5]
(b)
Comment on the possibility of mergers; of general growth through increased
sales caused by increased demand/advertising; of increased profits caused
by either increased demand or different pricing policies; of growth caused by
a change in type of stock or image; of expansion into other areas/products;
and a comment on the methods used to obtain finance – profits, borrowing,
shares.
[5]
(c)
Description of three types of economy that might occur. (6). Max of 4 if no
explicit reference to computer industry is made.
[6]
(d)
Discussion of possibility of substitution of one factor or another, for example,
capital for labour. This may be because of changes in the different costs of
factors. Discussion of aim of achieving efficient use of factors in order to
increase profits, such as alternative uses of the same factor. (Or possibly
increase in sales or market share. Syllabus concentrates on profit as the
major aim of the firm).
[4]
4 (a)
Might not be able to get another job, many low paid jobs are unskilled –
worker might not be trained to do skilled job: might choose to work part-time
and do not mind low pay; might view the job as a temporary measure until a
better job is available; might not know of alternative jobs due to lack of
information; might be limited by location of work; might be limited in other
jobs by age; might work in the informal economy and does not declare
earnings for tax.
[5]
(b)
Occupational and geographical factors include better conditions, better
prospects, location/shorter journey to work, can live in preferred area,
shorter hours, size of company, fringe benefits – subsidised meals, health
scheme, leisure activities.
[5]
(c)
Unions can help in negotiations of wage disputes, provide social amenities,
provide legal help, provide protection for worker.
[5]
(d)
Can discuss the relative expenditure of older skilled and younger unskilled in
terms of likely commitments, long-term debt, level of existing savings, likely
absolute level of income both with reference to age and to skill.
[5]
5 (a)
Explanation in terms of the rate at which one currency is exchanged for
another currency.
[3]
(b)
In Egypt, production and employment likely to fall as not so many goods
sold, resulting in reduced income and further effects on employment. In
importing country production might switch to home produced goods resulting
in an increase in production and employment and income. If demand
switches to imports from another country the effect in the importing country
will be reduced. Comment on Egypt only with no reference to countries that
Egypt has been exporting to, max of 4.
[7]
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Page 3
Mark Scheme
GCE O LEVEL– JUNE 2005
Syllabus
2281
Paper
2
(c)
Should describe the different accounts of the balance of payments.
(d)
Should explain what is meant by ‘an improvement’. Usually this is a surplus
or a bigger surplus. Could discuss how changes in the price of imports and
exports of goods and services might alter the quantity sold and imported and
how the balance of revenue for the account might change. This could
depend on changes in the exchange rate as well as changes in the cost of
production. The overall balance between imports and exports would
determine whether there is a negative or positive result in the goods and
services account of the balance of payments. Should also comment on the
capital transactions and the overall impact on the balance of payments when
taken with the trade in goods and services.
[6]
6 (a)
Explanation of resource allocation through price mechanism, use of demand
and supply and consumer equilibrium.
[5]
(b)
Discussion of areas of market failure. This will be expressed in general
terms – syllabus mentions the government as a producer of goods and
services but does not deal with public and merit goods.
[6]
(c)
Explanation of regulative controls, general laws preventing sales of items to
sections of the community, influence of increase in indirect or direct tax,
granting of a subsidy, monopoly regulation.
[9]
7 (a)
Factors including housing, sanitation, infrastructure, range of products
available, education, health provision. Note that it is usually presumed that
standard of living is lower in developing countries. This may not be true.
Population is sometimes not high and housing, consumer choice, education,
health provision is better than in developed countries.
[4]
(b)
Dependence on subsistence farming, lack of secondary or tertiary
development, unequal distribution of income, resources unused, population
growth not matched by use of resources.
[6]
(c)
Mention might be made of improvements in infrastructure, health, housing,
education or other economic or social indicators. Discussion could involve a
comment on the improvement brought by investment by the private sector
and/or influence of public sector. The latter could involve subsidies,
borrowing from foreign countries (including foreign aid), encouraging multinationals, increased expenditure.
[10]
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[4]